Market breakout telegraphing trend reversal at hand.

March 5th, 2012
in Gary's blogging, midday post


1:07     So where are we going today? First let's start with where the markets have been going and that is up. For the past 2 months the 2012 trading season has been positive in the aspect that markets have gone upwards to an area as of late being labeled as serious resistance. In spite of sometimes damning financial news flashing around the World the markets have continued to climb.

Over the last several sessions there have what appears to be signs of weakening, especially in the small caps leading the way. The daily highs overall in this macro analysis have not been any higher and many markets are showing signs of descending by rounding of their tops on their charts. Sideways trends of markets almost always have a “meaningful” breakout either up or down and that hasn't happened yet except in some small caps. Many economists are now saying a correction is overdue and could happen any day now, unfortunately they have been saying this for the past month.

As I watch the small caps lead the way down I have to wonder if this is telegraphing the real thing or just another small editing modifying their upward trajectory. The down movement hasn't been enough to call a correction, but the week isn't over yet. Normally, I would take the breaking out of any trend pattern to be the starting of a new direction, but this “breakout” hasn't been been confirmed by convincing volume.

Leavitt puts it well into perspective.

@leavitt: The trend remains up, but the warnings signs are getting extreme.

The 10-day of the AD line and AD volume line are near 0.

The % of SPX and NDX stocks at 20-day highs have been falling for a couple weeks.

The % of SPX and NDX Stocks above their 20-day MAs have been falling.

Copper failed to make a higher high with the market…so did the semis.

The put/call is moving up.

The small caps, which have been lagging for two weeks, broke down last Friday.

In other words be very careful in deciding to place a bet in this game of market roulette.

Written by Gary

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